* Dollar rebounds vs euro and yen after a sharp fall
* Traders think the dollar's drop the previous day too fast
By Satomi Noguchi
TOKYO, Jan 8 (Reuters) - The dollar rose against the euro on Thursday, recovering some ground made after data showed steep U.S. job losses in the private sector, as some traders thought the greenback's slide the previous day was too sharp.
The dollar dropped from one-month highs against the euro and the yen on Wednesday following a dismal report from ADP Employer Services that showed private employers shedding a staggering 693,000 jobs in December.
Those figures and comments from a Federal Reserve official cast more shadows on the outlook for U.S. non-farm payrolls data due on Friday and highlighted the challenges facing President-elect Barack Obama as he plans for a large economic stimulus package.
A sharp fall on Wall Street also highlighted fears of a prolonged U.S. recession and hurt sentiment for the dollar.
But traders said the previous day's fall in the dollar had been exaggerated in a market with few active participants such as hedge funds which typically provide liquidity to currency trading.
"The euro's jump against the dollar yesterday came across as too much, too fast, even though the job loss number from the U.S. private sector was an eye-popping one," said a trader at a Japanese bank.
The euro fell 0.5 percent from late New York trade to $1.3577, after having risen as high as $1.3747 on Wednesday on trading platform EBS.
The euro had dropped a one-month low of $1.3312 earlier this week as the dollar had been bought broadly since the start of the year on hopes for the economic stimulus package from the Obama administration.
The single currency fell 0.2 percent to 126.05 yen.
The dollar rose 0.1 percent to 92.78 yen, recovering from a near 2 yen fall the previous day. The dollar had hit a one-month high of 94.65 yen on Tuesday on EBS.
The U.S. economy is likely to contract through the middle of 2009, Kansas City Fed President Thomas Hoenig said on Wednesday. (Editing by Edwina Gibbs)